OUSEPH Vs. THE OFFICIAL RECEIVER

JUDGEMENT

(1.) This Revision Petition is filed by one of the legal heirs of the deceased insolvent Chacko Ouseph against an order rejecting an application praying to review an order passed by the Insolvency Court on 4th December 1972 and to set aside a sale conducted by the Official Receiver on 27th November 1972 in respect of 23 acres and 3 cents of land scheduled to the petition filed in the Insolvency Court. One Chacko Ouseph was adjudicated an insolvent on 31st March 1962. He died on 16th February 1964 and the insolvency proceedings were continued as against the estate of the deceased insolvent. As per the final list of creditors approved by the Court on 23rd July 1966 the amount due to the various creditors totalled Rs. 2,94,090.72. On sale of some of the properties of the insolvent two dividends of 25 paise and 55 paise in the rupee were paid by orders dated 4th October 1966 and 8th June 1971. The total amount paid as first and second dividends amounted to Rs. 2,36,135.43. The balance of the principal after payment of the dividend (80 paise in the rupee shown above), was Rs. 57,957.29. Since the estate was sufficient to pay not only the principal but also interest at the statutory rate of 6 per cent, by the report dated 25th June 1971 the Receiver submitted that for payments of the balance principal and interest upto 28th May 1971 Rs. 2,03,529.69 exclusive of administrative expenses is necessary. The court by order dated 1st July 1971 allowed the sale of the rest of the properties. But a direction was given that the Receiver will stop the sale on realising Rs. 2 lakhs by the sale of the assets. In pursuance to this order the Receiver sold a major portion of the rest of the items of properties. By his report dated 22nd December 1971 the Receiver prayed to accord sanction to pay the balance 20 per cent in the rupee and also interest upto the date of the report. In the report he gave particulars of the amounts due to and paid to the creditors and the balance amount due to each of them. He also stated in the report that there are sufficient funds in the estate to pay the entire amount due to the various creditors. By order dated 23rd December 1971 his report was accepted and the receiver was directed to disburse the amount to the various creditors. As seen from the dividend register all the creditors except one Cherian Joseph received the amount in full and acknowledged the same in the dividend register. Cherian Joseph also received a major portion of the amount due to him. Only a balance of Rs. 15,187 remained due. By the report dated 21st November 1972 the receiver sought permission of the court to pay this balance also to the creditor Cherian Joseph. In that report he submitted that for want of sufficient funds the balance of Rs. 15,187 could not be paid earlier and that there are sufficient funds in the estate to pay the balance and he sought sanction of the court to pay the same. On 24th November 1972 this was sanctioned. Subsequently on 27th November 1972 the receiver again sold the properties, the sale of which is now questioned. By his report dated 29th November 1972 the receiver requested the court to confirm the sale. By the order dated 4th December 1972 the court confirmed the sale. This is objected to by the present petitioner. The petitioner contends that the confirmation of the sale by the court on 4th December 1972 is in violation of the proviso to S.72 of the Insolvency Act (Act 2 of 1956), that the sale by the receiver of 23 and odd acres on 27th November 1972 was in violation of the provisions of the Act and the earlier orders of the court. By the earlier sale of some of the assets of the insolvent enough amount had come to court to pay all the creditors and the amount available with the receiver was more than enough to pay any balance due to any of the creditors and as such the Official Receiver had no need to sell any more properties of the insolvent. Further, by the order dated 1st July 1971 the court had directed the Official Receiver to stop further sale of the assets on collecting two lakhs of rupees by the sale of some of the assets. Further, it was contended that the sale was conducted for a very inadequate price and the estate has been prejudiced by such sale. The receiver and the persons who bid the auction have colluded together and the property which would go to all the heirs of the deceased insolvent has been secreted by a few of the heirs. This petition is opposed by the receiver as well as the auction purchasers of the property. According to them, there is no ground to review the order dated 4th December 1972; that the receiver had the right to sell the property and the sale was for an adequate price. The courts below have dismissed the petition and the correctness of the orders so passed is challenged in this revision petition.

(2.) I am afraid, the courts below have not cared to ascertain the necessary facts to dispose of the petition filed by the petitioner in the insolvency court. S.72 of the Insolvency Act enables a person aggrieved by the action of the receiver to appeal to the court within 21 days of the action complained of and the court is required to go into the complaint and dispose of it in accordance with law. In this case before the expiry of 21 days the receiver's report regarding the sale was approved and the sale conducted on 27th November 1972 was confirmed. When a statutory right is conferred on any person aggrieved to complain to the court within a particular time, it is not open to the court to approve or confirm the action of the receiver before the expiry of that time. That will be rendering the statutory provision otiose. So the fact that the receiver's sale was confirmed by the court before the expiry of 21 days will not disentitle the aggrieved person from complaining against the action of the receiver before the expiry of 21 days. The court is bound to look into that complaint and deal with it in accordance with law. Therefore, the lower courts are not right in taking the view that the confirmation of the sale on 4th December 1972 disentitles the petitioner from challenging the sale held on 27th November 1972 and refusing to review that order.

(3.) Equally the lower courts are wrong in taking the view that there were not enough funds to pay the creditors in full without the sale of the properties in question. By the report dated 22nd December 1971 the receiver had submitted that there are enough funds to pay the balance 20 paise in the rupee as regards principal and also the interest at 6 per cent till that date and the court sanctioned the payment of the amount due to each creditor. Excepting a small amount due to one of the creditors the rest were paid in full immediately after the court sanction. The funds to pay the small balance due to one of the creditors was also available by 21st November 1972 and the receiver by his report of even date sought permission of the court to pay that and the court sanctioned it by its order dated 24th November 1972. Thus, by the receiver's own report enough funds were available long before the disputed sale to pay all the creditors in full. The receiver did not disclose all the facts fairly to the court in spite of a direction by the court to furnish all the particulars of the availability of the funds and the payment to the creditors. In the course of the present proceedings in the Insolvency Court the petitioner by I.A. No. 1958/73 required the Official Receiver to report whether sufficient funds were available to pay all the creditors without the sale of these properties. In answer to that the receiver filed his report on 3rd September 1973 wherein he only said that all the debts of the insolvent had not been paid before 27th November 1972, that on 27th November 1972 the estate had a balance fund of Rs. 49,106.32 and that the insolvent's debts were paid in full on 29th November 1972. A perusal of the dividend register shows that the payment on 29th November 1972 was the amount of Rs. 15,187 sanctioned by the court on 24th November 1972 on the basis of the receiver's report dated 21st November 1972 wherein he said that the estate had got sufficient funds to pay off on that date the above sum of Rs. 15,187. Though the order was passed on 24th November 1972 sanctioning the disbursement the creditor received the amount only on 29th November 1972. That does not mean enough funds were not available to pay off the creditors in full without the sale of these disputed properties on 27th November 1972. From the receiver's report dated 3rd September 1973 it is further clear that Rs. 49,106.32 was the balance available on 27th November 1972. By the sale of the disputed properties only a sum of Rs. 19,925 was obtained. That shows that on the date of sale about Rs. 30,000 was available with the Official Receiver and there was no need to sell the disputed properties on 27th November 1972. In this connection it has also to be borne in mind that the court had by its order dated 1st July 1971 directed the Official Receiver to stop the sale if he is able to collect two lakhs of rupees by the sale of some of the items. All these clearly show that the Receiver's sale on 27th November 1972 was uncalled for. Though the property of the insolvent vests with the Receiver, the power of the Receiver to sell the insolvent's properties is restricted by S.61 of the Insolvency Act. That section requires the Receiver to realise with all convenient speed the property of the debtor and distribute dividend among the creditors entitled to and for that purpose sell all or any part of the property of the insolvent. When assets have already been realised which will be more than sufficient for the distribution of the dividends, the Receiver has no power to sell the properties. Hence, the action of the Receiver in selling the disputed properties on 27th November 1972 was clearly erroneous and unsustainable in law. The sale is liable to be set aside.